USD up on additional AIG rescue

Story link: USD up on additional AIG rescue

The US dollar gained ground on the euro and the pound Monday as the greenback was in demand as a safe place for cash after the news that insurer American International Group (NYSE: AIG) will get up to $30 billion more in US government bailout money on top of the $150 billion bailout it got last year.

AIG, which said it lost $61.7 billion in the fourth quarter of 2008, now has more announced bailout money than Bank of America (NYSE: BAC), Citigroup (NYSE: C), JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) combined.

Equities markets were lower on the bailout news.

Meanwhile, the euro was hurt by a new report showing that manufacturing continued to contract in the Eurozone in February as the Markit purchasing managers’ index came in at 33.5 in February, down from 34.4 in January and the lowest level in over a decade.

In addition, new orders to Eurozone manufacturers were at their lowest level in history in February, while analysts were betting that the European Central Bank will cut interest rates to 1.5 percent later this week.

In late morning trade in New York, the dollar was at $1.259 to the euro while both currencies were lower versus the yen, which traded at ¥122.6552 to the euro and at ¥97.425 to the US currency.

The pound weakened in relation to the greenback, the yen and the Swiss franc on expectations that the Bank of England will cut interest rates in the UK to 0.5 percent on Thursday.

Additionally, the Bank of England said that there were 31,000 mortgages approved in the UK in January, the same number as in December and fewer than expected.

At just past 11 a.m. in New York it took $1.3996 to buy a pound while the yen traded at ¥136.3541 to the pound and the Swiss Franc was at SFr1.6402 to the UK currency.